Japan’s economy grew at an annualized rate of 4.9 percent in the first quarter of 2010, apparently providing the government here with some much needed good news.
With rumours circulating that this summer’s upper house election will take place on July 11, a little earlier than expected, the Democratic Party of Japan will no doubt be looking for positives to campaign upon. However, Finance Minister Naoto Kan was quick to point out that the economy remains in a deflationary state.
Most of the growth came from exports rather than domestic consumption, a cause for concern with the effect on the world economy of the European debt crisis uncertain and the yen appreciating. The jittery markets certainly seemed more interested in such matters than the GDP figures, with the Nikkei plunging 2.45 percent on Friday to finish below the 10,000 mark. With domestic stimulus measures wearing off, it looks unlikely that domestic consumption will pick up the growth baton and the second quarter figures are widely predicted to be less flattering.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
It will also be interesting to see by how much these GDP figures are revised. Figures for the July-September quarter last year were ultimately revised from a surging annualized rate of 4.8 percent to a trickle-like 0.6 percent. A dramatic revision of this scale casts such doubt on the initial figures, you could be forgiven for wondering whether they should even be released in the first place.
While it might seem that even Japan’s economic statistics have started to waver since the government came to power, it's actually the DPJ that has decided the statistics must be improved. The Cabinet Office reportedly put together a plan to this end in February.
An interesting piece by Prof. Kyoji Fukao of Hitotsubashi University explains the whole problem of Japan’s GDP figures, which he describes as being reminiscent of pre-war economic statistics rather than those of a developed nation in 2010.
Fukao argues that GDP figures should be cross-checked from three sides (expenditure, income, production) and any discrepancies investigated, something that is not happening properly at the moment. But it’s not just a case of methodology. He also stresses the need to increase the number of staff working on these national stats. Fukao says more than 200 people do this job in the smaller economy of the UK. The figure for Japan? Just 58.